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| Tekijä: | Devereux, M. B. Engel, C. |
| Otsikko: | Monetary policy in the open economy revisited: price setting and exchange-rate flexibility |
| Lehti: | Review of Economic Studies
2003 : VOL. 70:4(245), p. 765-783 |
| Asiasana: | Monetary policy Financial policy Open economy Price level Exchange rates |
| Kieli: | eng |
| Tiivistelmä: | The authors develop a welfare-based model of monetary policy in an open economy. They examine the optimal monetary policy under commitment, focusing on the nature of price adjustment in determining policy. In the light of empirical evidence on nominal price response to exchange-rate changes the expenditure-switching role played by nominal exchange rates may be exaggerated in the traditional literature. In the presence LCP, the authors find that the optimal monetary policy leads to a fixed exchange rate, even in the presence of country-specific shocks. This is true whether policy is chosen cooperatively or non-cooperatively among countries. |
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